Edelweiss Securities has maintained 'Buy' on South Indian Bank (SIB) with target price of Rs 36 as against the current market price of Rs 24 in its report.

Commenting on the rationale, the broking firm said, ''SIB reported Q1FY16 PAT of Rs 653 million, which was lower than estimates on account of slower revenue momentum and high asset quality stress. NII growth remained muted on continued pressure in NIMs-down 15bps QoQ to 2.55%;  muted other income traction down 14% YoY, partially a derivative of high base due to higher treasury gain in Q1FY15 weighed on revenue; slippages stood elevated at 1.9% however, higher write-offs restricted the rise in GNPLs to 1.85%; and moderation in gold loans continued to rein in overall loan growth.

We expect near term growth to be slower, but expect momentum to build up as retail and SME segments start defining large part of book. Factoring in lower growth and higher credit costs, we cut our FY16E/17E earnings by ~14% and 10%. SIB has the potential to generate RoA and RoE of 0.9% and 16% by FY17E. At 0.8x FY17E ABV valuations, SIB is attractively positioned and risks are adequately captured leaving limited downside. Retain 'Buy/SO' with TP of Rs 36.''

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